New Terror Video Narrated by American?; How Much Did ISIS Encourage an Attack?; Friends and Family Gather to Honor V.P.'s Son; U.S. Government Hacked; Chasing Triple Crown; New Info in Hastert Case. Aired 4-4:30p ET

Aired June 7, 2015 - 16:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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JAKE TAPPER, CNN ANCHOR: One U.S. government agency might have been able to stop those Chinese hackers, if only it had bothered to click the link to update the software.

I'm Jake Tapper. This is THE LEAD.

The national lead, the U.S. saying four million government employees across nearly every federal agency, some with high clearance levels, had their personal data stolen, and that China is to blame. If that's true, how long will it be before Beijing gets the goods on someone and uses them to steal American secrets?

The politics lead, Dennis Hastert still in hiding, as a woman steps forward and says the former House speaker molested her brother when he was a young boy in high school. Now CNN learns the FBI is interviewing another potential survivor of child abuse.

And the money lead. American Pharoah, the horse with the name of an ancient Egyptian king, could become a racing god if he brakes the Triple Crown curse tomorrow. Of course, the last time that happened, I was 9 years old.

Good afternoon, everyone. Welcome to THE LEAD. I'm Jake Tapper.

It's very clear that the United States is fully engaged in cyber-war and the reality just hit home with news that, according to the U.S. government, Chinese digital soldiers launched an online assault, hacking into an American government database and stealing the personal information of some four million, four million current and former federal employees working for nearly every government agency.

The hack Hoovered up names, addresses, Social Security numbers, job details, including things such as assignments and training. Now, look, employees are rightfully freaking out, but beyond the fear of ruined credit ratings and cyber-theft monetarily, law enforcement officials seem primarily concerned that this hack is more about espionage.

It's hard to remember sometimes because so much of what they do is in the shadows, but the U.S. national security infrastructure that tries to keep this country safe is built on people, people who have secrets, whether medical, or professional or personal, people who can be blackmailed, people who can be bribed.

And now the Chinese or whoever has all this data is that much closer to stealing this country's secrets.

I want to get right to CNN chief security national correspondent Jim Sciutto.

Jim, China firmly denying any involvement in the cyber-attack, but it sounds as though the Pentagon just is not buying it.

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: They are not. It's believed to be sourced and specifically by the government of China.

And it is unprecedented both in scope and in its target, four million federal employees compromised, including personal information and security clearances. And it's just the latest in a series of hacks that appear aimed at building a huge database of data on Americans.

(BEGIN VIDEOTAPE)

SCIUTTO (voice-over): It only took one government agency that had not taken the simple step of updating its server software to open the door to an unprecedented and alarming cyber-attack believed to be by the government of China.

Though the White House still is not publicly naming the culprit, it's acknowledging the growing threat.

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: We have seen our adversaries using innovative techniques and to learn from their previous efforts to try to find vulnerabilities in our system and to exploit them

SCIUTTO: This attack appears designed to lay the groundwork for future attacks, using the stolen personal information to fool government employees in so-called spear-fishing attacks and to impersonate them to carry out insider attacks, and crucially by revealing who has security clearances and at what level, they may now be able to identify, expose and even blackmail U.S. officials around the world.

Targeting the personal information of federal employees is new. Chinese hackers had previously focused on stealing military and government secrets to enhance national security and corporate data for financial gain.

BEN BEESON, LOCKTON COMPANIES: I don't think that has stopped. But this is just a new attack vector, which has typically been used by organized crime for monetizing that data, and now nation states are clearly seeing that it has some use for them as well.

SCIUTTO: Security analysts say some agencies are not following the government's own guidelines to update operating systems with the latest protections. The Office of Personnel Management discovered the breach by using new software, but the detection came after the system had already been compromised.

After years of cyber-attacks by China, the Obama administration has tried raising the issue president to president. It even issued criminal charges against an elite group of Chinese hackers believed housed at this Shanghai building and known as Unit 61398. But China's attacks have only continued and grown.

[16:05:00]

JON HUNTSMAN JR. (R), FORMER UTAH GOVERNOR: Let's face it. Cyber, as we're all waking up to again this morning, is the newest domain of warfare. Traditionally, we have looked at sea and land and space, and now cyber is probably the fourth domain of warfare.

(END VIDEOTAPE)

SCIUTTO: Now, there is a debate about the wisdom of hacking back against China and other countries in retaliation. The private sector is legally barred of doing so. The government is worried about spark a cycle of escalation and retaliation.

Now, the president did issue an executive order authorizing cyber- sanctions on individuals and entities. Those were kind of like the sanctions you have against Russia, individuals and certain companies in response to their activity in Ukraine. But that really hasn't been taken advantage of yet, although you did see that when you had those criminal charges against those Chinese hackers.

TAPPER: Jim Sciutto, thank you so much.

Let's talk more about this with the former executive assistant director of the FBI and president of the cyber-security firm CrowdStrike, Shawn Henry. Also here, former federal computer crimes prosecutor Hemu Nigam, along with China expert Gordon Chang. He's the author of "The Coming Collapse of China."

Thanks to all of you for joining me.

Shawn, let me start with you.

What's the big fear here? Is it that there are now four million government employees and former employees who can potentially be blackmailed?

You know, it's going take a little bit of time through the course of the investigation to do a full damage assessment to determine what, in fact, was stolen, what databases were touched, how much data was actually exfiltrated.

I think the biggest concern for me though is the ubiquity of these attacks and still the perceived lack of urgency about organizations or governments to go back and draw the red line president to president to get this resolved.

Hemu, you had that top-secret clearance when you worked for the U.S. government. Do you worry that your information has been stolen? How far down the rabbit hole do you think this hack goes?

I think it's something like 80 percent of existing and former federal employees that are affected, so possibly both Shawn and I are in that bucket. And I think what's more important right now, in going along with what Shawn just said is, that if the federal government through its counterintelligence activities is attacking countries like China, it can't do it if it's living in a glass house.

And right now, that's how you should be looking at what we're living inside of is a glass house. These government systems are not protected well enough. They are not protected by basic security, just like updating. I'm always saying never hit remind me later to the home viewers when they hit that button to not update something.

Well, the government ought to ban that word from its entire dictionary.

TAPPER: Gordon, who is doing this and what is the long-term goal?

GORDON CHANG, COLUMNIST: Well, I think the forensics are going to take quite some time. But if it's China, we shouldn't be surprised, because they have been involved in a very-long term campaign, going back at least two decades, maybe 25 years, in attacking U.S. networks.

They have this so-called grains of sand approach, where they just sort of ask Chinese who have returned from the U.S. to tell them all sorts of things that they learned. Well, now they are able to do that through cyber means. And I suspect that once they do all the forensics it's going Beijing that's going to be the culprit.

TAPPER: And what's their long-term goal, Gordon?

CHANG: Well, of course, they want to undermine the United States. Their new J-31 fighter is -- it looks exactly like our F-35, and it may be even better than our plane.

So, clearly, they want to learn this information. They want to be able to turn former federal officials, maybe even current officials, they want to know who is the CIA's black ops. So, all of these things are going to be very important to China. And they will just go learn stuff by looking through all of this.

TAPPER: Shawn, the former CIA Director Leon Panetta warned in 2012 of a cyber-Pearl Harbor. He was referring to lives lost, the electrical grid shut down, transportation derailed. How close to achieving that kind of chaos are these Chinese hackers if they wanted to do such a thing?

HENRY: Well, Jake, it goes beyond China. We're talking Russia, Iran and even terrorist groups that are currently developing these capabilities to not only access networks and exfiltrate date, but also to actually destroy networks, to disrupt networks.

We saw this recently at Sony, where not only were e-mails stolen that were incriminating or embarrassing, but actually parts of the network were physically destroyed, where we have got electronic communications destroying physical capabilities. This is something that we have got to be concerned about and what the cascading effects of that kind of attack would be.

TAPPER: Hemu, the DOD, the Pentagon, they get hit with 10 million cyber-attacks each day, we're told. "The New York Times" reported that the NSA had ramped up its Internet surveillance. Why wasn't the Pentagon or whatever cyber-security apparatus is guarding the infrastructure here, why weren't they able to stop or even detect this attack until some time in April?

NIGAM: Look, that's the most surprising part here when I talk about the glass house.

The intrusion detection system was not even implemented until April, which means that if you look at it from a pure security perspective, they were about 10 years behind where they should be on security protections.

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And, in addition to that, when you're looking at employees, federal government employees, I think the Chinese government right now is probably making a profile of individuals who are compromisable, individuals who have nothing to worry about and there's no reason to even bother them. And they will stack-rank that, and then next thing you know, you are going to start getting targeted of who can be turned, who can disclose certain kinds of information.

And that's why this warfare, this digital warfare is not just war between people in uniform. It's now becoming personal. It's becoming personal through civilian employees. And that's very dangerous for the American public.

TAPPER: And, Gordon, meanwhile, President Obama has been working hard on this relationship with President Xi Jinping of China. They have been talking about letting China coming in to the TPP, the trade agreement. President Xi is coming to the United States in September. He wants to address a joint session of Congress. How does this impact any hope for better relations?

CHANG: Well, I think we need a reassessment of our relations with China, because for four decades, we have had this idea that we should integrate the Chinese into the international system.

And because of that, we have not taken measures to protect ourselves on cyber and some other things. And so I think that we need to look at whether Xi Jinping should have the privilege of addressing Congress. We should even think about whether this should be a state visit with all the pomp and ceremony on the state -- on the South Lawn.

All of these things are important because these issues are now becoming so critical to the United States, and it's not just here. It's in the South China Sea, it's North Korea, all the rest of it. Our diplomacy with China is producing the wrong results and we need to rethink and reassess what we're doing.

TAPPER: All right, Gordon Chang, Sean Henry, Hemu Nigam, thank you to all of you.

A new lead into the Boston terrorist plot inspired by ISIS. Authorities now say the suspect who was killed on Tuesday conspired with two others. Could one of them be the direct link to ISIS? That's next.

Topping our world lead today, a new video from the terrorists of ISIS released overnight appears to be narrated by a man with an American accent.

(BEGIN VIDEO CLIP)

ISIS NARRATOR: It is a khilafat that Allah established on the earth so that he alone is worshipped.

(END VIDEO CLIP)

TAPPER: It's yet another sign that ISIS terrorists are aiming their propaganda machine at Westerners in hopes that those Westerners may join the fight in Syria and Iraq, or try to carry out their own personal jihad at home as we saw in Boston this week, and Garland, Texas, last month.

Let's get right to CNN's Barbara Starr live at the Pentagon.

Barbara, what are your sources saying about this latest video?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: You know, Jake, people who watched these videos for years tell us that ISIS, as you would expect, continues to grow in sophistication online, in social media with its approach. If you hear a voice speaking fluent English, isn't that a voice that you might more likely relate to? Do they want to recruit Westerners and Americans? You bet. That fluent English voice just might be the trick to make somebody tune into them -- Jake.

TAPPER: Now, there have been critics who have been calling for the West and specifically the Pentagon to do more to shut down ISIS' presence online. I've heard the counter-argument that the West, the government, the U.S. gains tactical advantage from allowing ISIS to remain online.

Is that true? Does it help the Pentagon keep tabs? STARR: Yes, you know, it's a trade off. If they are online you can track where they are, perhaps. See what they are up to.

But the Air Force had a little surprise for at least some ISIS operatives, a lot of kerfuffle about this one. Apparently in the last several days, perhaps, the Air Force saw an ISIS posting, some operative posted in front of a command and control facility. They used geolocating tags to find the place, and a top general told reporters earlier this week that they were able to strike it, launched bombs within 22 hours, found the place, launched the bombs, dealt with the ISIS operatives there.

So, maybe a message for ISIS -- not so good to be online.

TAPPER: All right. So, talk about muting someone on Twitter.

Barbara Starr, thank you so much.

The influence or potential influence of ISIS is also in our national lead today. How much did that terror group encourage a man in Boston and his associates to carry out an attack, to try to plan attack?

The FBI says that Usaama Rahim had plans to kill officers just before they reached him on Tuesday, in a confrontation that ultimately ended with him being fatally shot.

A surveillance video should show that confrontation. Its release is expected only after Usaama Rahim's burial which is happening right now.

Pamela, the FBI arrest a second person David Wright, who is a relative of Usaama Rahim's, but there's also this third person who apparently met with the two of them on a beach. What else can you tell us about him?

PAMELA BROWN, CNN JUSTICE CORRESPONDENT: That's right. That third person is listed in the criminal complaints.

We're learning more about him. We know at this point, Jake, there haven't been any charges filed against him, but the FBI has been outside of his home for several days, the FBI searched his home as well and the investigation into what role he may have played in the alleged terror plot is still very active.

(BEGIN VIDEOTAPE)

BROWN (voice-over): Law enforcement officials are trying to unravel what happened on a Rhode Island beach where Usaama Rahim tried to set into motion a terrorist attack. Law enforcement officials say Rahim, who police shot and killed in Boston Tuesday, met on the beach with his nephew David Wright and an unnamed 24-year-old man. That man lives here in Rhode Island with his parents. Police searched the home Wednesday and law enforcement source tells CNN agents have spoken with him but he's not been arrested.

[16:20:04] The three allegedly plotted to behead activist Pamela Geller in New York, before Rahim changed his plan and decided to attack police officers in Massachusetts on Tuesday, according to the FBI.

RON HOSKO, FORMER ASST. DIR. FBI CRIMINAL INVESTIGATION DIVISION: The trick of this is, frankly, let the person get close enough so that they are taking a substantial step forward that their efforts, their actions are prosecutable.

BROWN: CNN communicated with the third individual through Twitter back in March as part of reporting on Americans who follow jihadists. He indicated he was in touch with terrorists online, including with ISIS. He claimed that alleged ISIS fighter was telling him to come to Syria to fight with the terrorist group.

This as CNN is learning known ISIS members were communicating through peer to peer communication with at least one of the three men, encouraging a terrorist attack of the U.S. Court records should Rahim bought three military knives on Amazon that were delivered to him in the last week.

WILLIAM EVANS, BOSTON POLICE COMMISSIONER: Well, when they have the knives and what happened across the country and across the world, the beheading of military and police officers, we can insinuate that that's why they had the knives and based on their comment, that's what they believed they were up to.

BROWN: Rahim had been on the FBI's radar for several years according to law enforcement officials. He became suspicious the FBI bugged his phone in 2012. On Facebook, under the alias Abdul Rahim al-Amreeki, he wrote, "I heard some clicking noises on my phone." He said an FBI agent called him and told him, "Sir, we have some allegations regarding you. I came by your house a few times but kept missing you."

(END VIDEOTAPE)

BROWN: And we have learned that the family of Usaama Rahim has viewed that surveillance video of the shooting that happened on Tuesday when the five officers approached Rahim and then shot and killed him. And also, the family spoke to their attorney yesterday, Jake, and disputed the allegations that he had anything to do with ISIS -- Jake.

TAPPER: All right. Pamela Brown, thank you so much for that report from Boston.

Joe Biden says good-bye to his first born son, a son he almost lost years ago in that horrific car accidents when he lost his daughter. A heartbreaking moment for a family that's already suffered so much loss. We'll have some of those emotional images coming up next. Plus, Josh Duggar's sisters come forward, acknowledging they are two of his victims. What are saying about him and what happened and the pain that they are feeling now that all of this public. That's ahead.

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TAPPER: Welcome back to THE LEAD. I'm Jake Tapper.

Also in our national lead today, an emotional farewell to Vice President Joe Biden's eldest son Beau Biden, who died Saturday after a battle of brain cancer at the age of 46. Joseph Robinette Biden III called Beau by his friends and family had served as attorney general of Delaware and had served in the National Guard and serving his country in Iraq.

He was a devoted husband to wife Hallie and father to two young children, 11-year-old Natalie and 9-year-old Hunter. And for so many of us who were lucky enough to have known him, Beau was a fine and serious man for whom words like honor and duty were not platitudes, they were principles. He was taken from this world way too soon.

CNN's Sunlen Serfaty joins us now live from outside the church where today's wake is being held in Wilmington, Delaware.

Sunlen, an incredibly painful time for the whole country really but also for the Biden family who has experienced so much grief.

SUNLEN SERFATY, CNN CORRESPONDENT: That's right, Jake, and, especially Vice President Joe Biden, who was very close to his oldest son. He was by his bedside when he passed away last week and over the last two days thousands of people have come out from this community, the vice president saying that support is what's holding him up right now.

(BEGIN VIDEOTAPE)

SERFATY (voice-over): As Beau Biden's casket arrived at the church, the line of mourners stretched around the block.

JACK MORTON, MOURNER: The Biden family is an icon here. We're here to pay our respects, not just to a great person, but a great family.

FAITH GREEN, MOURNER: Anybody that wanted to talk to Beau, he took time to talk to you and listened to you.

SERFATY: As the communities remembers Beau Biden in three days of ceremonies, for the family, the weight of the loss heavy in each moment. Beau's widow comforting their young son. The vice president wiping a tear from his granddaughter's cheek and standing with eyes close for reflection. On Thursday, Beau Biden's casket cloaked in red, white and blue laid in honor at the state capitol.

GOV. JACK MARKELL (D), DELAWARE: Beau had an extraordinary heart and from that heart he lived a life that is a model for us all.

SERFATY: The vice president's heartbreak palpable. MARKEL: His attachments to his parents part of history. Never have a son's love been so genuine and so deep.

SERFATY: Last month, as his son lay dying with brain cancer in a hospital just outside D.C., the vice president warned Yale graduates that life has a way of changing in a heartbeat.

JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: Reality has a way of intruding.

SERFATY: The pain of this reality has struck the vice president before. His first wife and daughter were killed in a car accident in the '70s, a tragedy he's been open about over the years.

BIDEN: No parent should be predeceased by a son or daughter. I unfortunately had that experience too. You know what? I was -- I don't know about you guys. But I was angry. Man, I was angry.